Comini v. Union Oil Co. of California

• Decision Date: 31 March 1977
• Citation: 562 P.2d 175,277 Or. 753
• Parties: James L. COMINI, Appellant, v. UNION OIL COMPANY OF CALIFORNIA, Respondent.
• Court: Oregon Supreme Court

Page 175

562 P.2d 175

277 Or. 753

James L. COMINI, Appellant, v. UNION OIL COMPANY OF CALIFORNIA, Respondent.

Supreme Court of Oregon.

Argued and Submitted Nov. 3, 1976.

Decided March 31, 1977.

Dennis H. Elliott, Portland, argued the cause for appellant. With him on the briefs were John J. Haugh, and O'Connell, Goyak & Haugh, P.C., Portland.

James E. Griffin, Portland, argued the cause for respondent. With him on the brief was Williams, Stark, Hiefield, Norville, & Griffin, P.C., Portland.

Before McALLISTER, ^* P.J., and HOLMAN, TONGUE, HOWELL, BRYSON and BOHANNON, JJ.

HOLMAN, Justice.

This is an action arising out of the sale of plaintiff's interests as a bulk petroleum distributor. Plaintiff contends that defendant, Union Oil Company, whose distributorship plaintiff held, interfered with the sale of his interests to third parties to plaintiff's damage. Plaintiff appeals from a directed verdict for defendant.

The facts will be viewed as favorably to plaintiff as possible, as is proper on appeal from an order granting defendant a directed verdict. Plaintiff had been defendant's bulk distributor at The Dalles for several years when the opportunity to manage a state liquor store presented itself and he desired to sell his interests. His contract with defendant provided that the distributorship could be transferred only with the consent of defendant. He entered into a written contract with one Rosenow to sell his interests for $17,000, subject to defendant's approval. Rosenow had no prior experience with petroleum products and was not approved.

Prior to the disapproval of Rosenow, plaintiff entered into an oral agreement with one Woodward, an experienced petroleum products distributor, for the sale of his interests to Woodward at the same price of $17,000, subject to defendant's disapproval of Rosenow and its approval of Woodward. Woodward was not approved because defendant decided to consolidate under one owner plaintiff's distributorship with a distributorship owned by one Byars in the neighboring locality of Wasco. Thereupon defendant informed plaintiff that 'you will sell to Bob Byars at his price, the money he can live with,' and, 'if not, you are out in seven days.' The contract between plaintiff and defendant provided that either party could cancel the agreement by seven days' written notice. Thereafter, plaintiff sold to Byars at Byars' price of $10,000.

The parties originally briefed and presented the case to this court as one of defendant's tortious interference with plaintiff's contracts with Rosenowand Woodward. Plaintiff's position was complicated by its contract with defendant which provides that the distributorship may be transferred only with the consent of defendant. However, this does not necessarily mean that defendant can arbitrarily refuse to approve a sale by plaintiff where no legitimate business interests of consequence to defendant are to be served by such refusal. In every contract there is an implied covenant of good faith and fair dealing. Perkins v. Standard Oil Co., 235 Or. 7, 16, 383 P.2d 107, 383 P.2d 1002 (1963).

A privilege to interfere with another's contract with a third party may be granted by consent. Section 890 of 4 Restatement of the Law of Torts recognizes that liability for an otherwise tortious act (including interference with a contract) may be avoided by privilege:

'A person who otherwise would be liable for a tort is not liable where he acts in pursuance of and within the limits of a privilege of his own or of a delegable privilege of another.'

Comment B. under the section recognizes that such privilege may result from assent. It states, in part:

'A privilege created by assent may be, and ordinarily is, Conditioned upon the existence of a specified purpose of the actor at the time assent is given and at the time the privilege is exercised. If an act is done with a purpose inconsistent with that for which the privilege is given, the act is not privileged. This is true either because the assent was obtained by fraud or because the act is not within the specified condition. * * * .' (Emphasis ours.)

It may be reasonably assumed that, at the time the parties gave their contractual consent to the termination provision, they contemplated that either party was privileged to invoke the right to cancel in order to protect its own legitimate business interests.

Defendant had a legitimate business interest in having an experienced distributor and was therefore privileged to reject Rosenow. It also had a legitimate business interest in consolidating two of its adjoining distributorships under one owner and was therefore privileged to reject Woodward, even though Woodward was a qualified distributor. There was nothing to indicate that consolidation was a subterfuge to accomplish other than a legitimate business purpose. It was plaintiff, not defendant, who initiated a change in ownership. The distributorship was obviously small. ¹ For cases which discuss the legitimate interests of one who is in the position of defendant, See Frank Coulson, Inc.--Buick v. General Motors Corp., 488 F.2d 202, 207 (5th Cir. 1974), and Pierce Ford Sales, Inc. v. Ford Motor Company, 299 F.2d 425, 429 (2d Cir. 1962). For these reasons we conclude that defendant was privileged to...